Will We Be Better Off in 2016?

Now that the campaign is almost over, it’s clear that this presidential cycle was all about the economy. Just not the economy we’re actually entering. This thought crossed my mind during the second presidential debate as Mitt Romney declared that, if elected, he would label China as a currency manipulator. It was a rehearsed entreaty meant to appeal to thousands of frustrated manufacturing workers and their bosses in Rust Belt states. But it mainly confirmed how far we are from understanding our place in the new global economy.

Not that long ago, the U.S. had that global economy all to itself. From the 1950s to the 1980s, it was the world’s dominant producer and consumer. In countries spanning Europe to Latin America, and throughout Asia, success was determined by how well they could siphon off a bit of this incredible growth. Things began to change in the 1970s, however, when Japan and Germany started making cars and factory equipment and electronic gadgets that beat their American competitors. And for the next 30 years, the U.S. struggled to adjust to increasingly competitive Asian and Latin American producers. But as long as it remained the world’s largest consumer market, the U.S. maintained lots of leverage. The government persuaded Pakistan to join the global war on terror, for instance, partly by promising its sock manufacturers duty-free access to its market.

It’s useful to consider the framework of Ian Bremmer, president of the Eurasia Group, a political consultancy. American power during the past half century, Bremmer says, has been based on a strong military and an enormous market — one that can reward and punish. And while the former has maintained its standing, the rest of the world is becoming much less fixated on the latter. Romney and Barack Obama can promise to punish China all they want (Obama, in fact, made an identical point in 2008), but their statements merely suggest either that they don’t realize America’s economic power has diminished or (more likely) that they’re just too afraid to say it out loud. And that’s too bad. Those Rust Belt voters would be better served, Bremmer says, if the next president could persuade American businesses to stop complaining about China and instead focus on making goods that its consumers want to buy. For decades, Chinese businesses studied the American market. Now it’s time to play catch-up.

As this political cycle comes to a close, it’s clear that the U.S. has entered a new economic chapter. By the next election, the upheaval of the past few years will have (hopefully) settled, and we’ll be looking at a clearer vision of our future. I asked several leading experts to project what the U.S. will look like by 2016, and there was a consensus. Instead of a sudden bounce back, Harvard’s Jeffry Frieden told me, there will be steady but far-too-slow growth. Unemployment will be at around 6.4 percent, according to Nigel Gault of IHS Global Insight, an economic forecaster. More significant, by 2016, Frieden and Bremmer noted, the U.S. will be adjusting to an economy in which inequality is a structural fixture. There will be millions who are unable to get work, and tens of millions more who will have to adapt to lower income. Meanwhile, those with college and advanced degrees will experience a country that has rebounded. Their incomes will grow.

China’s economy probably won’t eclipse the U.S. economy until some time in the 2020s, but by 2016, far fewer Americans will believe that the U.S. can stop China from manipulating its currency or doing whatever else it wants. By then Americans will probably have experienced its economic might firsthand. Brent Iadarola, a director at the industry-research firm Frost & Sullivan, told me that the new global economy will look like our current mobile-phone market. Nearly every American adult has a cellphone, but only 40 percent of them have an iPhone, Android or other smartphone. As such, the industry is expecting rapid growth in the next few years. By 2016, though, the U.S. market should be saturated, and smartphone manufacturers will have to add a lot of new features just to get a small number of people to upgrade. There won’t be large growth or large profits in the U.S. The major companies — and the secondary economy of case makers and app designers — will be focused on the tastes of emerging markets in Asia, Eastern Europe, Latin America and Africa.

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It’s also going to be much clearer to American workers in various industries that many of their best opportunities are overseas. Pharmaceutical companies are encouraged by the U.S. market in the next few years partly because so many baby boomers are reaching their peak medicine-consuming years. Once that market begins to disappear, though, Big Pharma will most likely pursue the billions of middle-aged people in quickly advancing poor countries. (They’ll have their work cut out for them competing against generic and local companies, but the potential is extraordinary.) According to the IMS Institute for Healthcare Informatics, 41 percent of all drugs sold throughout the world in 2006 were sold to Americans. Only 14 percent of drugs were sold to all of the emerging markets combined. By 2016, IMS expects that patients in those markets will buy the same value of drugs as Americans.

I heard this basic outline again and again — from cars to entertainment and even to agriculture. Mark Evans, editor of the trade journal Fertilizer International, told me that even in the crop-fertilizer industry “the baton is being passed.” Which is the best way to think of the shift our economy will take. It’s not that the U.S. economy will shrink. Rather, the U.S. economy is becoming boring while other markets are offering huge opportunity. An empire may not be abruptly ending, but the days of politicians talking dismissively about China’s monetary policy sure are.

Soon after the second debate, I called William Roger Louis, a leading scholar of the final stages of the British Empire. Louis told me that after watching Obama and Romney, he thought of Harold Macmillan, the first postwar British prime minister to fully accept that the U.K. needed to adjust to a smaller role in the world. After coming in to office, in 1957, Macmillan asked his cabinet to prepare an audit: to study Britain’s relationship with every colony, protectorate and outpost. He asked them to do so with a cold accountant’s eye and adopt simple economic pragmatism.

Over the next few decades, Macmillan’s audit served as a guide. The U.K. quickly left numerous Pacific colonies, shored up its relations with India, Pakistan and other former underlings and offered independence to various African and Caribbean nations while maintaining a huge economic presence. Sure, this comparison is imperfect. The U.S. has no colonies and will still be the biggest economy in the world for some time. Nevertheless, Louis said, the U.S. could still use a Macmillan moment — a statesman to help it adjust to an economy that doesn’t have the same amount of pull as it used to. In 2016, we will be one step closer. The question is when our leaders will be talking honestly about it.

Adam Davidson is co-founder of NPR’s “Planet Money,” a podcast, blog and radio series heard on “Morning Edition,” “All Things Considered” and “This American Life.”

A version of this article appears in print on October 28, 2012, on Page MM18 of the Sunday Magazine with the headline: A Quick Trip To 2016. Today's Paper|Subscribe